March 2006

Innovation and entrepreneurship

Syamal Gupta, director, Tata Sons, explores the significance of innovation and the role entrepreneurship plays in enabling innovations

"If you can imagine it, you can do it." – Walt Disney

All of us have shown the qualities of innovative thinking and entrepreneurship in some sphere of activity or the other, be it in our personal life or professional domain — whether in handling a medical crisis at home or a major social event in the family. These are all small instances of entrepreneurship, which lead to value addition in whatever sphere of activity that they have manifested themselves in.

Most of the fascinating instances of innovation and entrepreneurship can be viewed from an entirely commonsense point of view.

How many of us knew that Scotsman Dunlop’s first tyre was not only inspired by the flexibility of a garden hose, it was a piece of garden hose wrapped around a wheel! Or imagine the ubiquitous bicycle — the prototype of which was sketched way back in the fifteenth century (1493) by Leonardo da Vinci, while German inventor Karl von Drais is credited with its creation in 1818. Two major innovations — chain drive mechanism and rubber pneumatic tyre — towards the end of the nineteenth century gave us the modern bicycle.

Human imagination has no boundaries and indeed human civilization has been driven forward down the ages through human ingenuity — through discoveries, inventions and innovations.

A Swiss engineer, Georges de Mestral, was trying to discover a better fastener for clothes. After walking in the woods, one day he noticed burrs sticking to his clothes. Using a magnifying glass he found that tiny barbs from plants had hooked onto the threads of the fabric he was wearing. After eight years of experimenting, he designed two pieces of fabric: one with tiny hooks, the other with tiny loops, which would adhere when touched but could be ripped apart. Velcro was patented in 1957.

In the real world of the economic, political and corporate market place that we live and earn our living in, homegrown instances of entrepreneurship are presented with new challenges even as they offer new opportunities, with new vistas opening up, thanks to technological evolution of the world around us.

The human genome has been mapped. We can now image atoms and move them, one by one. We can use the web to download Shakespeare’s complete works.

In the 21st century, it’s the very nature of innovation that has changed: it’s happening faster, it’s more open and collaborative, and outdated concepts around tightly controlled intellectual property are giving way to a more enlightened emphasis on sharing intellectual capital.

Many realised achievements and capabilities were explicitly placed beyond the possible even a decade back. For instance, we are taking on protein folding, immune systems for computers, long-range weather prediction, experimental economics and a lot more using the innovative thinking and application.

For most of us as technologists, engineers and scientists, that’s why it’s exciting as well as a great challenge to be a part of the current wave of innovation — because, in today’s world, technology is leading human evolution.

This brings us to the elemental question — can we define innovation?

Innovation — a multi layered conceptInnovation is not just breakthroughs in space science, cloned animal farms or satellite communication. It can be more modest, incremental — just better than the previous alternative — a better value proposition.

The process of innovation has been around for a long time. In fact, it’s part of the evolution process itself — not just the evolution of technology or the evolution of business — but the evolution of humanity.

In some ways, at the dawn of the human civilization the ability to create and control fire was a massive innovation. It transformed human beings into social creatures. And this probably happened, as most innovations do, because one individual chose to look at a problem differently than everyone else.

If we look around us, we would find myriad examples from the mundane safety pins and bicycles on the one end of the spectrum to the very hi-tech nanotubes, composites, aerospace sciences, technology convergence in telecommunication, etc.

Innovation — key driversInnovation consists in the purposeful and organised search for changes and essentially means monitoring certain resources for innovative opportunity — both within and outside of the enterprise / business.

In an article, MIT’s Michael Dertouzos in the December 1999 Technology Review dwells on the pillars of innovation that reinforce the connection between need and innovation. Building on ideas in his book, What Will Be, he says: "Perhaps the most important ingredient of successful innovation is the creative technological idea that serves a pressing human need…"

That, I believe is the key — a creative idea that can enhance the quality of life, can bring to the people hitherto unforeseen benefits and a fulfillment of a need.

1. Market needIt is important to understand that the ultimate objective of innovations is not to establish technological superiority. The underlying objective of any innovation is maximisation of returns on a constrained resource by improving products and processes and creating a market for it.

In the 1920s, Charles Birdseye was puzzled with the problem of keeping frozen meat from becoming damaged by the cells becoming punctured by slow forming ice crystals. During a trip to Labrador, Birdseye watched how native people froze fish quickly. He developed a fast freezing process that reduced crystal formation and started selling small packages of frozen vegetables that still bear his name.

Consider what convergence of technology has done: An example is the iPod — a pocket-sized ultra-light, hard-drive-based device that includes technical specifications, video clips, interactive demo, and availability information. A wide range of features in an iPod makes it more attractive compared to an MP3 player, for example, greater memory capacity and extra features. Accessories used in the iPod can convert it from a mobile CD player to a video player, photo album and much more.

On a different plane, in the field of education, the mode of imparting education has undergone a revolutionary change and there’s a clamour for implementing distance-learning programmes by world-renowned colleges and universities due to three major reasons:

The convergence of communication and computing technologies;

The need for information age workers to acquire new skills without interrupting their working lives for extended periods of time;

The need to reduce the cost of education.

More importantly the outreach is enhanced by technology.

2. Economic growthIn a number of countries today, innovation has become one of the key factors propelling economic growth and enhancing social benefits.

According to the Growth theory by Robert Solow, technological progress and innovation is the greatest engine of economic growth. Recent studies indicate that technological progress is now responsible for up to half of the growth of the US economy.

3. Leverage talent – human resources and knowledge managementToday we live in an era of such rapid change and evolution that leaders must work constantly to develop the capacity for continuous change and frequent adaptation. They must recognise people’s innate capacity to adapt and innovate.

Technological innovation has become a major driver of progress. Innovation relies on intangibles, such as creativity, knowledge and experience. These intangibles are the most valuable resources of our time, much as raw materials were, during the early times of industrialisation.

What if we can use augmented reality to see the world through someone else’s eyes? What if we can use robotics and information systems to help an ageing population stay involved and independent? There are a lot of possibilities.

Forces that make innovation important in today’s world:

Need to increase the pace of innovation: Research alliances between firms in highly innovative activities, such as biotechnology.

Need to improve the technological base: Globalisation has made it necessary to project the innovative capabilities of nations, regions, industries and firms. Innovation has become a major tool in the race to create jobs and increase incomes.

Indicators of innovation may well be on the horizon and come to be used as regularly as those now published regularly to provide information on incomes, population or public health.

4. Creation of an unforeseen benefit — "disruptive" innovationOne of the important properties of innovation is that of ‘discontinuity’ and it can have a deep social and economic impact. "Disruptive innovation" means one needs to often deal with the unexpected, like:

Unforeseen changes in industry structure / market structure, etc;

Changes in demographics, changes in perception, and meaning;

New knowledge — scientific and non-scientific.

Commonplace examples could be:

Product

Discontinuities

Typewriters

Manual to electric, to dedicated word processors, to personal computers

Technological discontinuities can dramatically change the future of a company often resulting in either loss of market share or in extreme circumstances, bankruptcy.

In the field of architecture — consider the arch; till the Romans invented the arch, man’s creations remained small. This is because the materials used, like wood or stone had limitations. Yet man craved for creating taller buildings, needed bridges over rivers and difficult terrains. With the creation of the arch, man was no longer a slave to the form. Now the form was man’s domain. Longer bridges, bigger and taller buildings, all came from this wondrous innovation.

5. Strategic R&DA great idea can only get us started. In the changing global scenario and propelled market demand for newer and better products, to stay at the leading edge and to compete with more dynamic industrial economies as well as the newly emerging economies there is a need for:

Strong science and technological links with the best research in the world;

Incentives for knowledge transfer;

Business R&D;

High standards of education — imperatives of knowledge driven economy.

According to a new global innovation study by Booz Allen Hamilton, R&D productivity and not R&D investment is the real challenge for global innovation.

Growing market competition, not growing R&D spending, is what drives innovation. A successful innovation policy is a competition policy where companies see innovation as a cost-effective investment to differentiate themselves profitably.

The pace of corporate R&D spending continues to accelerate, as many executives continue to believe that enhanced innovation is required to fuel their future growth. The 2004 Global Innovation 1,000 spent $384 billion on R&D in 2004, representing 6.5 per cent annual growth since 1999.

R&D spending by companies in developing nations is relatively small, but growing rapidly. While companies headquartered in North America, Europe, and Japan account for 96.8 per cent of the Global Innovation 1,000’s R&D spending, and are likely to remain dominant players for the foreseeable future, companies with headquarters in China, India, and the rest of the world are turning up the volume on R&D investment.

How do we acknowledge that everyone is a potential innovator? How can we evoke the innate human need to innovate? It is possible to create organisations full with people who are capable of adapting as needed, to work with the innovative potential that exists in all of us, and to engage that potential to solve meaningful problems.

Global companies in pursuit of innovationInnovation in business and businesses engaged in innovation will be the key. Ideas and ideation will drive business and enhance quality of life for future generations.

Here are some illustrative examples:

MicrosoftThe ongoing innovation in their products helps them gain competitive advantage. Things like the Windows Media Audio format, for example, which, when it was introduced, made big strides in compression and quality.

The Tablet PC has taken the older notion of "pen computing" and through new technologies for inking, recognition and annotation, has helped to create a new category.

The Smart Personal Objects Technology (SPOT) represents a new way to think about bringing connected intelligence to everyday objects such as watches.

MitsubishiIn July 2004, Mitsubishi Corporation (MC) unveiled "INNOVATION 2007: Opening Up a New Era" to develop and promote new business models in response to emerging market needs. The post of the chief innovation officer was established to guide and promote the group’s overall R&D strategy while working closely with each business group.

MITThe Deshpande Center for Technological Innovation at MIT is engaged in projects like growing human liver cells for drug testing, and creating a new material for computer displays. Grants are awarded for determining technical feasibility of breakthrough ideas.

IBMBelieve in exploring new ways of working with an ‘ecosystem of innovators’ to solve societal challenges. Some examples of innovations over the past fifty years are:

IDEOA widely admired America’s leading design firm that brought the world the Apple mouse, Polaroid’s I-Zone instant camera, the Palm V, and hundreds of other cutting-edge products and services, is known for fostering a culture and process of continuous innovation.

SonyConsider the Walkman. Akio Morita felt that individuals should enjoy the music of their choice, anywhere, anytime, without disturbing others. This innovation in personal audio systems set in to motion an incredible revolution in the entertainment sector — this enabled them to tap into a larger market.

In a recent study by Booze Hamilton Global 1000, more than half (57 per cent) of the companies surveyed already have an R&D presence in China, India or Singapore.

Innovation in Asia is on the rise, technology being a great levelerAn interesting example is that of Vimicro. The Chinese chip manufacturer holds some 400 patents and is the world’s leading supplier of PC camera processor chips, proof of Chinese innovation, making a transition from "manufactured in China" to "designed in China".

Innovation involves experimentation and risk taking. Risk of failure often justifies potentially high returns from successes that are an incentive to innovate in the first place. Hence, failures cannot and should not be a deterrent. Take the example of the (American) General Electric Company, it failed in computers but has been a successful innovator in three totally different fields — aircraft engines, engineered inorganic plastics and medical electronics.

What are the factors common to the success stories in innovation? First and foremost we see that personal gain is not the prime driver of innovation. What is the engine of innovation? What is the prime mover? The innovator can see what success can mean and he is passionate about his goal.

Innovation and entrepreneurship — ideally must coexistEntrepreneurship is essentially about people and their ability to evaluate new opportunity and to bring about a match between innovation and market needs.

The French economist J B Say stated more than 200 hundred years ago that the entrepreneur "shifts economic resources out of an area of lower and into an area of higher productivity and greater yield". Be that as it may, enterprise in today’s competitive world and dynamic times represents something larger in terms the scale of the impact of the enterprise.

Enterprise is perhaps what McDonalds have achieved. They have taken advantage of the eating out habit; used the traditional fare and achieved stupendous value addition — creating management tools for value creation for the customer across the country and international borders, making the American style outdoor dining habit a global phenomenon. This is undoubtedly entrepreneurship.

The study, ‘The Innovation-Entrepreneurship Nexus’, written by Advanced Research Technologies, United States, has demonstrated that mere innovation without entrepreneurship generally doesn’t lead to a remarkable economic impact. The findings of the research indicated that entrepreneurship tended to be high in regions where innovation was high.

Entrepreneurs can lead to a healthy linkage between inventors, innovation and economic growth. Economists say that besides focusing on economic development through the use of technology, there is an urgent need to support entrepreneurs so that innovations can be translated into jobs and economic growth.

India – imperatives for innovation and entrepreneurshipAs Indian companies strive to become globally competitive on cost and quality, the need is to recognise and pursue innovation as a tool for sustainable advantage in products, processes, business models, organisations.

Innovation in India could be seen in three distinct phases:

1. Infrastructure build-up phase (1947 – 60s)

2. Re-orientation phase (1960 – 80s)

3. Market orientation phase (1990s onwards)

Post liberalisation in 1991, came the reality of intensified competition, which meant that innovation had to be integrally woven into a firm’s strategy and had to derive and sustain competitiveness through innovation.

India continues to spend less in comparison to that of the other developing countries like China, Brazil and Korea (they all invest more than 1 per cent). A recent study shows that R&D expenditures by most developing countries is far lower than that of most developed countries.

Innovation in rural IndiaCurrently, two major organisations — the National Innovation Foundation (NIF) set up under Dr Mashelkar and the Rural Innovation Network under Paul Basil in Kerala, are engaged in promoting innovations at the grassroots level.

The NIF has been providing support for R&D and filing patents enabling green grassroots innovators to build linkages with formal science, technological experts, convert them into enterprises and pursue intellectual property rights protection.

Till the year 2000, a tiny village in Karnataka four hours from Bangalore, never received any power supply. Until resident, G K Rathnakar hit upon an innovative idea and devised a turbine light. The innovation virtually changed the life of the average resident there — TV, mixer grinder, fan, light and pump set could now be used, thanks to this innovation. His hydro-turbine machine generates electricity by making use of the available water and caters to the local need. Sixty-five turbine units have already been installed which supply electricity to nearly 300 households.

Spirit of entrepreneurshipEntrepreneurs are first and foremost change makers, achievers — not just visionaries. This applies equally to ‘entrepreneurs’ from Mahatma Gandhi to JRD Tata.

Entrepreneurs can be sociologists — Dr Yunus of Bangladesh’s microfinance fame; Rabindranath Tagore as the founder of the Vishwabharati; just as they can be Henry Ford.

To fully realise potential of new ideas, we must continually meld innovation and business nurturing entrepreneurial spirit.

Tatas as pioneers and entrepreneurs – an illustrationAt this point I would like to mention that some of the most awe-inspiring enterprise, creative thinking and foresight were demonstrated way back in the 19th century by the founding father of the Tata Group, Jamsetji Tata.

He envisioned hydroelectric power as a clean source of energy hundred years on, the world continues its debate on Kyoto protocol, sustainable development and clean development mechanism.

His concept of welfare and community development around a steel plant were far ahead of his times; we all know how corporate social responsibility has been rapidly integrated in recent times into the corporate balance sheet of companies worldwide. Tatas have nurtured innovative ideas and displayed entrepreneurial spirit in venturing into new geographies, market segments, product areas.

To cite some instances of innovative / novel endeavours by the Tata Group:

Tata MotorsAn exciting project is the ‘people’s car’, which would sell for around $2,200 (about Rs 1 lakh). A number of incremental innovations mark the project, like the possible use of bolted or glued panels instead of welded bodies.

Indigo — the first sedan designed and manufactured in India. This technology (as is used the world over) allows Tata Motors to meet customer needs in different segments with a single base model.

TitanEdge from Titan — the ultra slim wristwatch that is only 3.5mm thick and 30m water-resistant is a path-breaking design concept. No other company selling mass produced watch is slimmer than this.

Tata SteelDeveloped low phosphorus steel from high phosphorus ore.

Tata BP SolarI believe the sun, sand and sea (water) are all inexhaustible sources of renewable and clean energy. It will play a significant role in the years ahead in terms of innovative harnessing and applications for the benefit of the larger mankind.

In the US, for example, renewable energy sector has seen more entrepreneurial startups in recent times — Miasole (solar startup making solar cells without silicon and based on copper alloy technology), Seattle Biodiesel, Hydrogenics (fuel cell technology), etc.

Various novel applications of solar photovoltaics and thermals have been developed with a view to serving the larger community and rural needs. I would like to dwell on these at length, highlighting the reach and impact, innovative applications have in enhancing the quality of life of the people in a developing country like ours.

ConclusionWe are living in an era rife with challenges and complexities. It is an era of development and competition; the world is advancing towards informationisation, gridification, globalisation and knowledge driving.

Technological innovation will expand fresh development space for humans in aerospace, ocean, deep earth, virtual cyberspace, etc. Science ethics and science and technology development will bring man into a new stage of circular economy and sustainable development.

Nevertheless, man is facing new challenges. Pressure from population, resources, ecology and environment is increasingly building; while pushing forward the progress of human civilization. Science and technology poses a challenge to human ethics as well.

Organisations must be imbued with the entrepreneurial spirit, wanting innovation, actively promoting it, considering it both a necessity and opportunity.

Innovation is strongest in cultures where tinkering is not just allowed but encouraged. In the eighteenth and nineteenth centuries, the European countries were master innovators. The twentieth century belonged to the innovators of America and Japan. The twenty-first century has already been called the Asian century.

Countries such as India are poised to become significant knowledge economies and must take on the challenge of looking at making innovations work in the context of developmental imperatives.

However, technology must be relevant, affordable and innovative and necessarily multidisciplinary to grapple successfully with the problems of developing countries.

I believe that innovations will be the mainstay for societies to forge ahead and the level of our engagement in research and development activities coupled with appropriate applications in the frontier areas of nanotechnology, healthcare and biotechnology, material sciences, alternative sources of energy will determine a nation’s place in the new global order.

The world will always need innovators and innovations; it is not a destination but an endless journey and the spirit of entrepreneurship will continue to be a great enabler.

* This is an edited version of the address by Syamal Gupta at the centenary celebration of the Mechanical Engineering Department, Jadavpur University on March 19, 2006

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The quest for sustainable business: Sustainable development cannot be achieved by a single enterprise or by the entire business community in isolation, argues Syamal Gupta, the chairman of Tata International. It is a pervasive philosophy to which every stakeholder in society and participant in the global economy must willingly subscribe